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Nasdaq CIO outlines disaster recovery plans before Congress

27 September 2005

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Source: Nasdaq

As part of the Federal government's continuing inquiry into the nation's ability to cope with natural and manmade catastrophes, the Subcommittee on Government Management, Finance and Accountability of the U.S. House Government Reform Committee today heard testimony from Steven J. Randich, Executive Vice President of Operations and Technology and Chief Information Officer of The NASDAQ Stock Market, Inc. (NASDAQ; Nasdaq: NDAQ).

Randich spoke about NASDAQ's preparedness and the benefits of electronic trading networks in the event of wide-scale disaster or disruption. "The exchange model in the U.S. is evolving towards electronic trading, and this will enhance naturally the capital markets' ability to withstand catastrophic events," said Randich. "NASDAQ's operating model provides us with a natural and tremendous business continuity advantage."

Randich explained that NASDAQ utilizes hundreds of geographically diverse and competing market makers who provide the trading liquidity for each security listed on the market. NASDAQ uses a sophisticated computer and telecommunications network, which transmits real-time quotes and trade data to more than 2 million users in 83 countries. NASDAQ's "open architecture" market structure places virtually no limit on the number of market participants that can provide liquidity on NASDAQ and places virtually no geographical restrictions on those market participants.

"NASDAQ has offered strategic guidance to both the government and private sector. In addition, the FBI, Navy, various military officials, our market participant customers and most recently the Secretary of the Treasury have toured our technology facilities to learn from us about continuity and disaster recovery," added Randich.

Randich pointed to the 9/11 attacks and their aftermath to demonstrate NASDAQ's unique ability to withstand the worst disasters.

When the blackout in the northeastern part of the United States occurred on Aug. 14, 2003, Randich said that those improvements proved worth it. "Although large portions of the northeastern United States were out of business, NASDAQ was fully operational during the blackout."

"At no time throughout the week of 9/11 were NASDAQ's systems inoperative. At the time of the attacks, trading was suspended, but NASDAQ's systems and network continued to operate," continued Randich. But he said they did find room for improvements. "We added more frequent testing to our backup site. Testing, which had been quarterly; was increased to monthly, and we selectively invite market participants to take part," said Randich.

One example of this strengthening, according to Randich was NASDAQ's announcement of a contingency plan to trade NYSE-listed stocks if the NYSE is ever unable to operate both its primary and backup systems. "NASDAQ is now able to trade all NYSE and AMEX stocks if their respective trading floors were rendered inoperative for an extended period of time. In effect, in the event of a catastrophic New York metro emergency, NASDAQ is fully capable of trading all 6,700 U.S. Securities listed on NYSE, AMEX, and NASDAQ on our geographically diverse and resilient network," he said.

"The industry is irreversibly moving towards electronic trading, and this is good news for resiliency," concluded Randich. "With electronic trading, an exchange need no longer be tied to a place. Rather, it can be maintained redundantly in multiple places and run by multiple systems, and redundancy is the key to security against any form of accident or attack. What is best for investors and for markets overall is also best for our financial and national security."